Transfer pricing analysis and documentation
Recent developments have increased the need for robust transfer pricing analysis and documentation. The new OECD guidance has also prompted tax authorities around the globe to increasingly scrutinize financial transactions. Local transfer pricing guidance/regulations, such as in the Netherlands and Germany, may also deviate to some extent from OECD guidance, thus complicating matters further. In addition, there is an increasing amount of local transfer pricing case law on financial transactions (including the Dutch ‘onzakelijke lening’ or ‘non-business motivated loan’), which is also worth considering.
Therefore, now more than ever, it is important that multinationals maintain a robust approach to the arm’s length pricing of:
- Intercompany loans/receivables
- Thin capitalization and debt capacity substantiation
- Participation in cash pools, including benefit allocation
- Intercompany financial and performance guarantees
- Captive insurance arrangements
- Hedging, factoring and other specialized financial transactions
Global developments
In recent years, financial markets have been rocked by major events, including the phaseout of LIBOR benchmarks, measures by Central Banks to curb inflation and most recently the reduction of (risk-free) interest rates (such as ESTR and SOFR) by Central Banks. At the same time risk premiums have been increasing as a result of uncertainty, macro-economic developments and geo-politics, to name but a few. These global developments also pose many questions for multinationals with regard to their financial transactions transfer pricing policies.
How can we help with financial transactions transfer pricing?
Our financial transactions transfer pricing professionals are experts in this field and can help with:
- Setting up and structuring intercompany financial arrangements to assist with liquidity and other business objectives, while minimizing tax risk
- Perform diagnostics on an organization’s existing intra-group financial transactions, in light of the new OECD guidelines and local guidance/case law
- Design and implement practical transfer pricing policies and operating procedures for financial transactions, including intercompany agreements
- Assist with transfer pricing for central treasury operations/inhouse banks
- Prepare robust transfer pricing documentation documenting the arm’s length nature of the intercompany financial transactions
- Help MNEs navigate the tax controversy landscape if disputes arise with regard to intercompany financial transactions
Our Financial Transactions team has significant experience with the above, including dealing with the Dutch tax authorities. We are also able to help resolve disputes related to financial transactions transfer pricing or as part of an APA/MAP process, together with our team of Tax Controversy specialists. Our access to the global KPMG network means we can provide assistance with local financial transaction issues worldwide.
